GameStop (EB Games, formerly Babbage’s) is a company specializing in the distribution of video games and electronic equipment. The company is headquartered in Grapevine, Texas. As of January 2022, the company had 4,537 outlets worldwide.
| GameStop | |
|---|---|
| Name | GameStop |
| Creation date | 1984 |
| Legal status | Limited company |
| Stock | New York Stock Exchange (GME) |
| Slogan | Power to the Players |
| Head office location | Grapevine, Texas États-Unis |
| Parent | NeoStar Retail Group (1994–1996) Babbage’s Etc. (1996–1999) Barnes & Noble (1999–2004) |
| Activity | Retail |
| Products | Video games Consoles Accessories |
| Subsidiaries | Babbage’s EB Games EB Games Australia Game Informer Geeknet Micromania-Zing Rhino Video Games ThinkGeek Zing Pop Culture Australia |
| Website | gamestop.com |
| Economic information | |
|---|---|
| Capitalization | US$7,770,000,000 (January 6, 2022) |
| Equity | US$1,322,300,000 (January 28, 2023) |
| Turnover | US$5,927,200,000 (January 28, 2023) |
| Accounting balance sheet | US$3,113,400,000 (January 28, 2023) |
| Net profit | −313,100,000 US dollars (January 28, 2023) |
GameStop history
In October 2008, GameStop acquired Micromania, then the largest video game retailer in France.
In 2010, J. Paul Raines was appointed CEO.
Also, in December 2018, GameStop announced the sale of its subsidiary Spring Mobile, which owns nearly 1,300 AT&T branded stores, to Prime Communications for $770 million.
2019
Dissatisfied shareholders
In February 2019, shareholder Hestia Capital wrote a letter to the Board of Directors suggesting changes, including savings and share buybacks. Dissatisfied with the answer, Hestia Capital joined forces with Permit Capital. The two investors owned 1.3% of the company’s capital at that time. They announce that they want to propose alternative candidates for the next election of the board of directors. Finally, the board of directors signs an agreement with the shareholders. As part of the agreement, certain changes requested by shareholders will be implemented, including share buybacks.
Share buyback
In 2019, GameStop took advantage of its low share price to buy back about one-third of its outstanding shares at a price below book value.
A share buyback results in a decrease in the number of shares outstanding. This mathematically increases the ownership share of the remaining shareholders.
2020
The victory of activist shareholders at the General Meeting
In June 2020, activist shareholders Hestia Capital and Permit Capital (who together own 7.5% of the company) managed to elect Kurt Wolf and Paul Evans to the board of directors and to eject from the board Jerome Davis and Thomas Kelly, whom activists had criticized a lot. Including Lizabeth Dunn, the activists managed to bring in a total of three representatives out of the ten members of the GameStop board of directors.
The composition of the Board of Directors following the General Meeting is as follows:
- Kathy Vrabeck (Member since 2012. President since 2020);
- Carrie Teffner (Member since 2018);
- George Sherman (Member since 2019 and Executive Director);
- Lizabeth Dunn (Member since 2019);
- Raul Fernandez (Member since 2019);
- Reggie Fils-Aimé (New member);
- Kurt Wolf (New member);
- Paul Evans (New member);
- William Simon (New member);
- James Symancyk (New member).
Entry of Ryan Cohen (RC Ventures) into the capital
In August 2020, Ryan Cohen bought 9% of the group’s shares through his company RC Ventures.
Ryan Cohen is an activist investor who wants to push the company to expand the group’s e-commerce business and close loss-making stores in some shopping malls.
In December 2020, Ryan Cohen increased his stake to 12.9%.
Partnership with Microsoft
In October 2020, GameStop signed a multi-year partnership with Microsoft. The agreement provides for the use by Microsoft’s group of services and products, but also the sale of Microsoft products to GameStop customers. Microsoft will pay a commission on digital sales (games, DLCs, subscriptions etc.) made from Xbox sold by GameStop
2021
Board and Management Renewal
In January 2021, the Board of Directors expands with three members proposed by RC Ventures: Ryan Cohen, Alan Attal and Jim Grube. In total, all activist shareholders have six representatives out of the thirteen members of the Board of Directors. The Board of Directors anticipates that after the June Annual General Meeting, the Board will be reduced to nine members, with a majority of five members representing activist shareholders.
In March 2021, GameStop created a committee to transform it. Activist shareholders Ryan Cohen (RC Ventures) and Kurt Wolf (Hestia Capital Management) are part of this committee.
Administrator Reggie Fils-Aimé, who is not a member of the committee, later claims to have been sidelined by Ryan Cohen. The latter wanted to greatly limit the number of people informed of the group’s strategy in order to avoid GameStop’s competitors knowing it in advance. Reggie Fils-Aimé decides to leave the Board of Directors within the year.
In April 2021, the company announced the appointment of two new board members to take office at the June Annual General Meeting: Larry Cheng and Yang Xu. Ryan Cohen will be appointed Chair of the Board of Directors.
Later that month, CEO George Sherman announced he was leaving the company in July 2021, two years after his appointment to the position. The reason for his ouster by the board of directors is his lack of expertise in e-commerce.
The composition of the Board of Directors at the end of the June General Meeting is as follows:
- Ryan Cohen (Member since January 2021 and new Chair of the Board);
- George Sherman (Member since 2019 and Executive Director);
- Alan Attal (Member since January 2021);
- Jim Grube (Member since January 2021);
- Larry Cheng (New member);
- Yang Xu (New member).
Capital increases and debt repayments
GameStop raises $551 million in a first capital increase in April 2021, then $1.13 billion in a second capital increase in June 2021. On May 3, 2021, the company announced that it had used some of this money to prepay all of its long-term debts, amounting to $216.4 million in 10% interest bonds that were normally due in 2023.
Development of e-commerce
The company announced on May 3, 2021, that it will open a 700,000-square-foot (approximately 65,000-square-meter) distribution center in York, Pennsylvania.
On June 9, 2021, GameStop announced that Matt Furlong will be the new CEO and Mike Recupero the new CFO. Both worked for Amazon before their appointment. Since Ryan Cohen joined GameStop’s board, many Amazon employees have been hired.
On July 6, 2021, the company announced the opening of another distribution center in Reno, Nevada to serve the West Coast of the United States.
As of July 28, 2021, the group’s Canadian stores and sites, previously known under the EB Games brand, are gradually moving under the GameStop brand.
2022
Development of an NFT marketplace in the field of video games
On February 3, 2022, GameStop announced a partnership with Immutable X. As part of this partnership, Immutable X is offering $100 million of its own tokens that will be distributed to NFT creators.
In March 2022, Ryan Cohen, the chairman of the board, buys an additional 100,000 shares and increases his stake to 11.9%.
Also in March 2022, the consulting firm Boston Consulting Group sued GameStop for “unpaid invoices” of $30 million. GameStop, which has $1.3 billion in cash and cash equivalents, says it wants to “fight” in court and says it is “proud to no longer use the services of companies like BCG for any service.”
In July 2022, GameStop launches the beta version of its NFTs marketplace. In just two days, the trading volume on GameStop’s platform exceeds the total volume of NFTs (in Ethereum) on Coinbase’s platform opened in April.
Also, in October 2022, GameStop’s NFT marketplace is officially launched. The marketplace makes it possible to exchange elements that can be used in certain video games.
Physical stores
In August 2022, GameStop announced salary increases and share distributions for thousands of employees in its stores, including managers.
In December 2022, the Italian company Citiverde acquired the Swiss subsidiary of GameStop. The stores will be operated under the Gamelife brand starting in April 2023.
2023
GameStop announces a profit for the 4th quarter of 2022 (which ends at the end of January 2023), while financial analysts expected a loss.
Board of Directors
Since 2021, the Board of Directors has been composed of:
- Ryan Cohen (Chair);
- Alan Attal;
- Jim Grube;
- Larry Cheng;
- Yang Xu;
- Matt Furlong (Executive Director).
Shareholders of GameStop
According to the most recent public information as of November 3, 2022, GameStop’s shareholders are as follows:
| RC Ventures LLC | 12% |
| Iridian Asset Management LLC | 8,19% |
| The Vanguard Group, Inc. | 7,73% |
| Senvest Management LLC | 6,63% |
| Maverick Capital Ltd. | 6,12% |
| Epoch Investment Partners, Inc. | 4,81% |
| SAB Capital Management LP | 4,73% |
| Rainier Investment Management LLC | 4,14% |
| Aristeia Capital LLC | 3,87% |
| Cornerstone Investment Partners LLC | 3,53% |
Transfer of shares and registration in the shareholders’ register
Many GameStop shareholders decided to transfer their shares to the company’s transfer agent, Computershare, using the Direct Registration System. GameStop reported in December 2021 that 5.2 million shares were registered with Computershare by shareholders, then announced the number of 8.9 million shares as of March 2022, and the number of 12.7 million shares as of April 30, 2022. In 2023, 76 million shares, or approximately 25% of the outstanding shares, are held and registered with the transfer agent by shareholders. One of the reasons for these transfers from banks to the transfer agent to be registered in the company’s shareholder register would be the fear by shareholders that their shares would be loaned by their bank to hedge funds who could thus sell the shares short.
According to the company, 197,058 shareholders are registered in the shareholders’ register on March 22, 2023, compared to 125,543 on March 11, 2022, 1,683 on March 17, 2021, and 1,425 on March 20, 2020.
GameStop case
In January 2021, the GameStop share price is subject to a massive increase led by the subreddit WallStreetBets. This comes shortly after a statement by Andrew Left, director of the Citron Research fund, predicting that the value of the stock would decline. It actually increases by more than 600% on January 26 and its high volatility causes trading to stop several times. Another hedge fund, Melvin Capital, is forced to ask for $2.75 billion from other private groups to cover its losses on GameStop stock. The French-language press described this action as the “GameStop Affair “.
On January 24, 2021, a WallStreetBets moderator stated that there is “no organized effort on the part of moderation to promote, advise or recommend actions.”
After the closing of GameStop shares up 92.7% on January 26, 2021, entrepreneur Elon Musk tweets a link to the subreddit, which further increases the effect of the stock market operation. This has an effect on r/wallstreetbets’ subscriber base, which grows from 2.2 million subscribers the day before to more than 8 million subscribers a week later.
On February 2, 2021, GameStop’s share price fell 60% on Wall Street. On February 24, 2021, the price increases by more than 150% in the space of 2 hours. According to analyst Michael Pachter, short sellers continue to put pressure on GameStop stock. “As prices rise, more and more short positions continue to enter GameStop. It’s a vicious circle for short positions and a virtuous circle for long positions,” he says. Accusing some hedge funds of manipulating the price, people (especially on Reddit) indicate that they keep their shares.
In May 2021, some hedge funds continue to bet on the decline of the GameStop stock through options. On May 12, 2021, the GameStop Twitter account referred to the “MOASS” (mother of all short squeezes) in several tweets and interactions, which reinforced Reddit users’ belief that the stock would rise massively during a forced liquidation of short squeeze positions.
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